Virgin warns it may raise fares

VIRGIN Blue says it is on track to deliver positive earnings for
the financial year, but may increase fares to combat rising fuel
costs.

Chairman Neil Chatfield, speaking at the annual meeting in
Brisbane,said the airline expected earnings to stay positive as it
began an expansion program expected to increase capacity by 25 per
cent.

Next month Virgin Blue enters the New Zealand domestic market
and late next year will launch its international airline, V
Australia.

Mr Chatfield said Virgin's other three airlines, Virgin Blue,
Pacific Blue and Polynesian Blue, had returned positive results in
2006-07, which contributed to the of $216 million record
profit.

"The next 12 months will be a period of exciting growth for
Virgin Blue as we extend our operations across Australia, New
Zealand and the South Pacific and commence long-haul international
flying with the launch of V Australia in the fourth quarter of
2008," Mr Chatfield said.

Chief executive Brett Godfrey warned that the fuel surcharge on
fares might have to rise over the next few months if crude oil
climbed above $US100 a barrel.

"We're unlikely to do anything in the short term, but if it does
spike and go over $US100 and looks like it's going to remain there,
we will need to do something in the next few months," he said.

"All we're alluding to is that if it maintains where it is
today, this time next year we will most definitely have some
addition to the fuel surcharge that we have at the moment."

Virgin Blue's fuel bill for 2006-07 was $489 million.

Mr Godfrey said he hoped to announce V Australia's US services
in February, with flights expected to begin by Christmas next
year.

He did not "believe for a minute" that Air New Zealand would
move to buy Toll Holdings' 65 per cent stake in the airline if the
logistics and transport company decided to sell.

"I just can't see the Government of New Zealand acquiring an
Australian airline but funnier things have happened," Mr
Godfrey said.

Toll's managing director, Paul Little, has said it will decide
by the end of the year whether to sell the Virgin Blue stake, which
is worth an estimated $1.5 billion. Virgin Blue shares gained
3¢ to $2.25.